Windicator: Mixed signals from global markets

Our decision to move the Feelgood Factor arrow slightly into positive territory is based on a complex picture of market activity that has been healthy in some quarters but has remained stagnant in other, important regions.

Feelgood Factor

The arrow is back in optimistic territory, last achieved in January 2012. Turbine manufacturers' earnings are improving strongly, and wind is increasingly competitive with its big rival, nuclear. Latin America is adding wind, albeit more slowly than last year. However, firmer optimism is only warranted if the lethargic US gets back into the game.

The Windicator index of installed capacity reveals continued resilience in the key markets of China, India, the UK, Germany and Brazil, as well as burgeoning growth in up-and-coming countries across the South American cone and Africa.

Meanwhile, an analysis of second-quarter wind-project activity shows that there is confidence among developers. Windpower Intelligence (WPI), Windpower Monthly's market research unit, observed a 28% year-on-year rise in project announcements and large rises in permitting and construction starts.

The data provides insight into the workings of particular markets. China and Europe steamed ahead in the second quarter. Project activity in the Asia-Pacific region, dominated as ever by China but with Indian contribution too, was solid across the spectrum, from announcement to permitting and finally construction.

In Europe, overall activity was also robust, but with a greater emphasis on late-stage development, while permitting and turbine purchase agreements stalled.

Activity in Latin America was patchy: there were increases — albeit from low levels — in permitting starts, turbine purchase agreements and construction completions, but most other aspects of development suffered in the second quarter compared with the same period a year ago. This is reflected in the easing in Latin American installations from 30% growth in new megawatts, year to date, in October 2012 to 19% this month.

North America

Construction cranes are gathering dust in the US. Previous powerhouse Texas has added no new capacity since the start of the year, and even once-wind-friendly California has put only 83MW online. Overall, installations have grown just 6% in the year to date, compared to 11% at this time last year.

The marginal rise that has occurred is thanks to a small handful of states: Oregon, Oklahoma, Minnesota, Washington and Michigan. In fact, Michigan added the most of any state - 140MW - increasing its cumulative installed capacity by 17% from January, to 988MW at the time of going to press.

The North American market warrants a closer look. In the April-June period, North American project activity grew only across the early stages of development, compared to the same period in 2012. There was a slight rise in project announcements, site acquisitions and permitting starts. But even these were very few in number.

Meanwhile, there were fewer permitting completions, construction starts and so on through to the final stages of commission and project expansion. The US essentially flat-lined, with only tentative signs of life.

Mixed signals

Since June, WPI has continued to receive mixed signals from global markets. In August, announcements and site acquisitions appeared weaker than in the same month last year, but increased numbers of power purchase agreements and construction starts buoyed overall growth in on-year activity to 15%. The US was responsible for almost none of this activity.

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